Emerging Fund Managers: Overcoming Infrastructure Challenges to Attract Investors

• 78% of Limited Partners believe first-time funds using outsourced middle and back office solutions are more attractive to investors
• Intertrust launches guide for emerging fund managers, looking to set up a private capital fund

The biggest obstacles for emerging fund managers are the cost and expertise of building a middle and back office system as well as coping with the regulatory burden, according to a new study commissioned by Intertrust, a global leader in providing expert administrative services to clients operating and investing in the international business environment.

Almost six-in-ten (59%) Limited Partners (LPs) cited the difficulty in building a sufficiently robust fund infrastructure as the greatest challenge facing emerging fund managers, followed by coping with the increased regulatory burden (45%).

While still important, factors such as building a cohesive investment team that would last the distance (35%) and a sufficiently differentiated investment strategy (31%) were less important to LPs in assessing General Partners’ (GP) ability to raise a first-time fund.

Over three-quarters (78%) of LPs believe that emerging fund managers become more attractive to investors if they make use of outsourced solutions for middle and back office systems and technology.

The research comes at a time when Intertrust is seeing a dramatic rise in enquiries from private capital professionals looking to launch new funds, many of which have been highly successful.  Industry data shows that first-time funds secured USD26billion in capital commitments across 226 funds in 2017 accounting for a quarter of all private equity funds closed in 2017.

In response, Intertrust has produced an Emerging Fund Manager Guide targeting the next generation of managers. The guide provides comprehensive guidance not only on the key information they need to consider, but also highlights the pitfalls and blind spots that can be faced by emerging fund managers who are setting up a fund for the first time or spinning out from an existing fund.

Commenting on the report, Michael Johnson, Director Fund Services, at Intertrust said:

“Now is a great time to be launching a private capital fund for the first time as investor demand shows no sign of slowing down.  Yet in our experience too many emerging partnerships fail to attract investor capital because of a substandard fund infrastructure.  Too many GPs focus on the importance of their investment story and their team’s track record at the exclusion of a robust middle and back office solution.”

“Our Emerging Fund Manager Guide is designed to address and highlight some of the challenges managers face in navigating the complexities of establishing a successful fund. These managers can benefit from our proven track record, asset class expertise and ability to provide access to innovative technologies.”